The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Situations impact every organization every day, and always will. A formula for dealing with complex challenges is S+R=O, a deceptively simple, yet powerful tool.

The job of the modern general counsel is to assess Situations (S), articulate desired Outcomes (O), and craft innovative Response strategies (R) to get there.
We may not be able to stop the S from happening, but we can influence the O with smart Rs.

Here’s an example applying this formula to the toughest Situation currently faced by the modern general counsel:

The Situation

Regulation has exploded, costing U.S. industries tens of billions of dollars. This tsunami of regulation is growing each year, threatening to overwhelm even those companies with major resources.

80,000 regulations added since 1993;

7% increase in the rate of new regulations from 2009-2012;

4,000 new regulations added in the last year;

Estimated $61 billion in annual administration and enforcement costs—a 50% increase in the last decade;

Estimated $1.8 trillion in annual compliance costs to U.S industries—more than half of the federal government’s operating cost; and

More than 4,000 additional new regulations pending—which likely will add another $22 billion in compliance costs.

Before fashioning an appropriate Response to the tsunami of regulation, we must define the best Outcome within our control. Changing the laws and scaling back regulation may be a long term consideration, but it’s not a viable O to address the Situation right now.

So we’re left with the question of how best to manage and comply in this complex regulatory environment, with appropriate risk management, and with minimal impact and disruption to the business.

And therein lies the O: minimize the burden of regulation across the organization while maintaining healthy risk management.

The Response

What Response is best suited to make that O happen? You may not be able to escape a tsunami, but you can prepare for it.

These three unconventional techniques can prepare your company for the S:

Align And Assign: Regulations are a corporate responsibility that can’t be shunted just to one department. Compliance risk impacts all organizations across the company, and as such, should be handled in a cross-functional, collaborative process, with executive attention.

Harness The Hotline: Companies shouldn’t fear the anonymous hotline. On the contrary, the power of the employee base should be welcomed and leveraged to drive compliance initiatives. One of the key attributes impacting a company’s “culture of integrity” is the employees’ comfort level in reporting unethical behavior or practices without fear of retaliation.

Encourage employees to report potential problems—anonymously if need be—such that the company can address issues before they must are escalated to outsiders.

Invest In Scenario Planning: Risk mitigation is one key component of an effective action plan. What to do in the case of a risk event is another. The modern general counsel must ensure sufficient time is invested into handling the risk event—not just avoiding it.

The cross-functional team should review and update regularly a process playbook—or series of scripts—detailing what must be done in case of the most likely risk events that could impair the company, its operations, business or continuity. This should include routine training of executives to handle hypothetical scenarios.

The Bottom Line

Applying these measures engages the entire company in risk management, ensures appropriate executive attention, and prepares you when the tsunami makes landfall.

Ultimately, this reduces the burden of the tsunami on our colleagues, allowing them to focus on building great products and generating revenue.